Five CEOs Weigh in on the Dreamliner Debacle

With the next-generation Boeing 787 Dreamliner still grounded around the world as regulators investigate two worrying battery fires, the company is scrambling to find a fix that can get its plane back in the air and its reputation on the mend.

But beyond Boeing, a whole ecosystem of customers and suppliers are also watching the situation closely for impacts on their own businesses. Here’s what a few said in earnings calls in recent weeks.

Carlisle Companies Inc, a diversified manufacturer, is one part of the 787 supply chain through its unit that sells high-tech wires and cabling systems. One analyst asked if any slowdown was expected in the unit due to the 787 challenges. CEO David Roberts said he expects the opposite:

No. Conversely to that, they’ve told us not to slow the production at all, that they don’t expect this to be a long-term issue. And they’re actually expecting to increase demand mid-year.

Air Canada, which has an order for 787s it expects to begin being delivered next year, didn’t seem particularly bothered by the plane’s challenges. Here’s its CEO Calin Rovinescu:

We believe that 787 is a great airplane, and we have complete confidence in the ability, the desire and, indeed, the imperative for Boeing, now with the support of the FAA and other regulatory bodies in other jurisdictions to resolve the lithium-ion battery issues quickly and safely.

Furthermore, we have not been given any indication by Boeing, thus far, that we should anticipate any changes to our delivery schedule starting in 2014.

More explicit was advanced battery maker Enersys, which puts its products into everything from submarines to helicopters. The company has generally avoided heavy investments into the lithium-based batteries that are at the center of Boeing’s problems, and one analyst asked whether the high-profile issues with the Dreamliner will lead to any change in the way it approaches the technology. Enersys CEO John Craig gave a pretty lengthy answer (emphasis ours):

As you know, our investments in lithium have been modest. They’ve been small. And part of the reason for that is because, you’ve heard me say in the past, when you look at economics associated with lithium, not just the cell, the cell goes from, let’s say, $200 to $270 per kilowatt hour, the total battery cost, in my opinion, has been high and it’s going to get higher. And the reason I think it’s going to get higher is because in those applications, you’re going to find that added protection is needed. I’d give you an example of one. With — the lithium-ion batteries, there’s different — there’s probably 12 or 13 different types of lithium-ion batteries. So when you look at the particular one that we used in Boeing and that one is one that does have conditions that can cause problems. I think what you’re going to see in the future, that from our end on it, those designs, you need to assume they’re going to catch fire. And when they do, they need to be in a container not to allow it to cause damage to other areas. I mean, that’s lithium technology. It does have a condition called thermal runaway. That’s nothing new. I mean, the computer industry, the cellphone industry has experienced it in the past. The auto industry, to a lesser extent, has seen some problems with it, too. So you have to be very careful from the design standpoint on it. The other side of the fence, I think it’s a great technology for certain applications that the premium associated with it is that the people are willing to pay. They should pay. As an example, your cellphone or the satellite. And our area of expertise in this is really, into satellites, is putting it on the proton rockets and it’s putting into select military applications and into select telecommunications applications. But that’s technology that is different and needs to be treated differently than a traditional asset.

European tourism operator TUI, which offers flights as well as holiday packages, has two Dreamliners due to be delivered in the coming months, the company said on its earnings call. “To be quite frank, we don’t know yet” how those deliveries will pan out, said Peter Long, head of the company’s travel unit. If the deliveries are delayed, the company will hold on to its existing Boeing 767′s instead, which chief financial officer William Waggott said would have a financial impact:

But it’s a relatively small number and its an inconvenience operationally. But we’ll be able to manage it within the result as we did with much bigger problems. This is a relatively small issue from a financial, and it’s not great from a publicity point of view and it’s not great from a Boeing point of view. But we and Boeing are very confident we’ll sort it.

And RTI International Metals, which supplies specialty metals to the aerospace industry, has a particular interest in the 787 Dreamliner project, which is a flagship for next-generation materials being used in airliners. The company’s CEO Dawne Hickton said it is business as usual in terms of demand from Boeing:

Although the investigation into the lithium-ion batteries remains open, RTI’s production plan for the 787 has not been changed in any of our businesses. In consultation with our customers at Boeing, including meetings that I attended as recently as last week in Montréal, we have been advised to proceed with our schedule to produce more than 75 ship sets this year, which is an increase of over 30 from 2012.

But despite the current problems with the Boeing 787 battery issue, based on our latest information from our direct contacts at Boeing, we’ve been instructed to ramp on schedule, and we are expecting to deliver more than 75 seat track ship sets this year versus 44 in 2012.